COFFEE WORLD 11
INTERNATIONAL ICO tracks further increase in prices
INTERNATIONAL FLO provides update on efforts in coffee sector
In February the Fairtrade Labelling Organisation (FLO) issued an update on its ongoing efforts in the coffee sector. "Since the coffee market began its steady climb around May 2010 it has reached a 14-year high of US$2.75 (as of 21 February)," said FLO. "While these prices can help farmers, a high market is deceptive." According to the Fairtrade Standards, the reference price for
Fairtrade certified coffee is the ICE Coffee ‘C’ Futures contract for Arabica coffee. When the ‘C’ price is above the established Fairtrade Minimum Price, traders must pay the market price or the price negoti- ated at contract signing. Many of the organisations representing small scale farmers signed
The ICO says green coffee prices are likely to remain high for the foreseeable future
Coffee prices in February recorded further increases in relation to their levels in January 2011, with the monthly average of the ICO composite indicator price up from 197.35 US cents per lb to 216.03 US cents per lb, the highest level recorded since June 1977. The average of the 2nd and 3rd positions on the New York
and London futures markets rose by 9.8 per cent and 8.9 per cent, respectively. On the New York futures market, which reflects the situation
with regard to Arabicas, the average was 261.41 US cents per lb in February 2011, the highest monthly level recorded since May 1977. "Market fundamentals continue to favour firm prices. Given
the limited availability of Arabica coffee on the international market and the strength of domestic consumption in Brazil, high levels of production in Brazil in crop year 2010/11 failed to have a negative impact on prices," said the ICO in its latest monthly statement. "Moreover, world stocks need to be replenished since they
are at their lowest levels for many years. At the same time, however, current price levels do not encourage producing countries to retain stocks and, notably in Vietnam producers continue to export and take advantage of high price levels. In addition, adverse weather continues to affect the coffee grow- ing areas in many parts of the world." Exports by all exporting countries during January 2011
totalled 8.8 million bags, bringing the cumulative total for cof- fee year 2010/11 (October 2010 to January 2011) to 33.7 mil- lion bags as against 29.7 million bags for the same period in coffee year 2009/10, an increase of 13.4 per cent. During this period Arabica exports increased by 24.7 per cent while Robusta exports fell by 5.9 per cent. "In conclusion, it should be noted that the precarious bal-
ance between supply and demand continues to favour firm prices. With prices expected to continue at such remunerative levels, a high level of export performance can also be expect- ed in coffee year 2010/11. However, the prospect for replenish- ment of stocks in producing countries remains weak. Finally, recent increases in prices of oil products are likely to accentu- ate increased production costs for most agricultural products, including coffee," said the ICO.
contracts earlier in the year to qualify for the pre-financing. In the ensu- ing time, the prices for coffee have risen, harvests have been smaller than expected, there has been intense competition on the ground for high quality coffee, and a small number of cooperatives are having a difficult time fulfilling contracts. The high prices also affect traders and roasters. "This market is an opportunity that is pushing Fairtrade to learn
how to strengthen, deepen and broaden the Fairtrade impact for the farmers, traders, roasters and consumers who make up the Fairtrade system," said FLO. In November, FLO announced the Fairtrade Coffee Actions, concrete actions to address the challenges in coffee.
Since the actions were announced, it has made a number of advances: A mediation process was set up that will be distributed to stakeholders shortly and will include a best practices component for handling defaults.
A review of the coffee standard and minimum price, which was scheduled to finish at the end of 2011, has been stepped up and any changes to minimum prices, premiums and trade standards were due to come into effect on April 1.
A surplus in the Producer Certification Fund from 2010 was used to offer financial assistance to any coffee producers with open invoices in 2010. This fund is still available for coffee producers who qualify.
A Product Advisory Council (PAC) meeting was held on 13 January. The PAC is a gathering of select individuals from all levels of the coffee chain, including cooperative representatives, traders, roasters and others. PAC meetings help staff at FLO gather market and product intelligence that informs strategy and projects such as standards improvements.
FLO is also supporting the participation of Fairtrade Africa at the EAFCA and working to bring coffee buyers to their round table event. FLO and Fair Trade USA will partner on a producer forum with workshops for producers and traders at the Specialty Coffee Association of America’s Expo in April. FLO is also looking to utilise the Specialty Coffee Association of Europe’s event to engage with European traders.
FLO is working to improve access to financial resources for certified producers.
Fairtrade producers are enrolling in risk management training and FLO is
funding workshops and trainings around the world. "FLO is working closely with farmers and industry to solve this problem over the short, medium and long term," FLO concluded.
May 2011 C&CI
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